Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q1 2020 Earnings Presentation
46 slides from Commerce Bancshares's earnings presentation, Apr 28, 2020
Slide 1: Embracing a Growth Mindset: Investor Update 1st Quarter 2020
Embracing a Growth Mindset COMMERCE BANCSHARES, INC. INVESTOR UPDATE 1st Quarter 2020
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT A number of statements we will be making in our presentation and in the accompanying slides are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements of the Corporation’s plans, goals, objectives, expectations
Slide 3: Commerce Bancshares
COMMERCE BANCSHARES $26.8 $20.8 154 YEARS IN BUSINESS BILLION IN ASSETS BILLION IN TOTAL DEPOSITS 47TH LARGEST U.S. BANK BASED ON ASSET SIZE1 $15.1 BILLION IN TOTAL LOANS2 $5.6 BILLION IN MARKET CAPITALIZATION $9.1 TH BILLION IN COMMERCIAL 18 CARD VOLUME as of 12/31/19 LARGEST U.S. BANK BASED ON MAR
Slide 4: Super-Community Bank Platform
SUPER-COMMUNITY BANK PLATFORM A consistent strategy with a long-term view Customer relationship-based: Community Bank Challenge Accepted.® Super-Regional Bank • • Award-winning High-performing teams Sophisticated payment customer service and engaged workforce system capabilities • • Focus on the ful
Slide 5: Our Strong Culture Is the Key Driver to Our Long-Term Success
OUR STRONG CULTURE IS THE KEY DRIVER TO OUR LONG-TERM SUCCESS A culture At Commerce, our core values shape the way we live and work. formed 150+ years ago to • We have a long We make decisions today that will be a force for V sustain us well into the future. good in our term View region and • We see
Slide 6: Beyond Financials
BEYOND FINANCIALS Supporting each other, our customers and our communities 1 2019 Engagement & Enablement nonprofit organizations supported by Consistently scoring above 500 Commerce team members through volunteer hours the U.S. High Performance As a socially and in leadership roles by serving on bo
Slide 7: Recent Recognition
RECENT RECOGNITION Commerce Bank was named a Commerce Bank was named among Top Midsize Employer by Forbes for America’s Best Banks 2020 by Forbes. the third consecutive year and Ranked in the top quartile nationally ranked in the top one-third among and 2nd Missouri-based bank. Since a selection of
Slide 8: Q1 Financial Results
“ QI FINANCIAL RESULTS & Commerce Bancshares, Inc. 8
Slide 9: Financial Performance vs. Prior Year
FINANCIAL PERFORMANCE VS. PRIOR YEAR Net Income Attributable to Earnings per Common Return on Total Average CBI ($ in Millions) Share As of March 31 $434 As of March 31 As of March 31 Assets $421 $3.60 $3.58 1.76% 1.67% 1.58% .80% $97 $0.81 $52 $0.44 YE 2018 YE 2019 YTD 2019 YTD 2020 YE 2018 YE 2019
Slide 10: Drivers of 1st Quarter 2020 Earnings
DRIVERS OF 1ST QUARTER 2020 EARNINGS NIM decreased 3 bps to 3.33% from 3.36% in Q4 2019, driven by lower yields on commercial loans and investment securities. Growth in average Net Interest business and personal real estate loan balances increased net interest Margin income and helped to partially o
Slide 11: Net Interest Income: YTD March 31, 2020
NET INTEREST INCOME: YTD – March 31, 2020 Quarterly Net Interest Income ⦁ Net interest income (tax equivalent) declined slightly $220 (Tax Equivalent) 4.0% – from the prior quarter. $210 3.8% ⦁ The decrease from 1Q 2019 was mostly due to a $200 Net Yield decline in interest earned on loans due to lo
Slide 12: NIM Protection
NIM PROTECTION Hedge against lower interest rates by purchasing interest rate floor contracts and maintaining duration Floor Impact on Loan Yields Maintaining Duration Assumes Loans at LIBOR +200bps 8% In addition to the interest rate Unhedged Illustrative floors, Commerce has been 2.5% Floor (effec
Slide 13: A Full-Service, Diversified Operating Model
A FULL-SERVICE, DIVERSIFIED OPERATING MODEL Card, Wealth & Deposit fees provide stable, growing revenue source Non-Interest Income Net Interest Income $ in millions $501 $525 8% $461 Wealth Management $422 $447 11% Deposit Service Charges 1% 7% Commerce Fees and Commissions $121 $124 1 Bank Card Inc
Slide 14: Well-Diversified Loan Portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO 2 Business Loans YTD Average Loans $s in millions 6% Construction $14,707 $13,929 $14,079 17% Business RE $13,537 34% Residential RE $12,596 Commerce Consumer/HELOCs 1 Bank Credit Card 18% 2016 2017 2018 2019 2020 6% 2020 Loan Growth by Category (Average loans Mar. 20
Slide 15: Summary of Fixed & Floating Loans
SUMMARY OF FIXED & FLOATING LOANS Nearly 58% of total loans are variable; 65% of commercial loans have floating rates; mostly tied to a LIBOR index Fixed Variable Business Construction Business RE Total Loans: $5.6B Total Loans: $0.9B Total Loans: $2.8B 4% 35% 44% 56% 65% Commercial 96% Personal RE
Slide 16: High Quality, Highly Liquid and Diverse Investment Portfolio
HIGH QUALITY, HIGHLY LIQUID AND DIVERSE INVESTMENT PORTFOLIO Composition of AFS Portfolio AFS Portfolio as of March 31, 2020 Total investments $8.7 billion 4% 11% Treasury & agency 14% Unrealized gain $241.0 million Municipal 15% 12 month maturities / pay-downs $1.4 billion MBS Duration Other asset
Slide 17: Impact of CECL: Allocation of Allowance
IMPACT OF CECL: ALLOCATION OF ALLOWANCE March 31, 2020 CECL allowances reflect the economic and market outlook due to COVID-19 December 31, 2019 January 1, 2020 March 31, 2020 Methodology and Incurred Model CECL Adoption CECL Model Variables Allowance Allowance Allowance % of for Credit % of for Cre
Slide 18: Net Loan Charge-Offs: YTD March 31, 2020
NET LOAN CHARGE-OFFS: YTD – March 31, 2020 ‘20 ⦁ YTD YTD Actual Loss The YTD decrease in 2019 2020 $ Change Rate business loan net charge- $ in 000s offs was primarily due to a Business $ 447 $ (373) $ (820) (0.03)% recovery on a single Overdraft 317 426 109 42.37 % leasing customer. Construction (1
Slide 19: Commerce and COVID-19
“ COMMERCE AND COVID-19 & Commerce Bancshares, Inc. 19
Slide 20: Commerce's Preparedness and Response to COVID-19
COMMERCE’S PREPAREDNESS AND RESPONSE TO COVID-19 Taking care of our customers and team members is our top priority • Activated our Pandemic Preparedness and Response Plan and COVID-19 Task Force. • Validated Business Continuity Plans for all teams, including successful use of remote access. • Built-
Slide 21: Key Actions Taken in Response to COVID-19
KEY ACTIONS TAKEN IN RESPONSE TO COVID-19 We continue to monitor the outbreak & implement updates as the situation evolves. 2018-January 2020 February 2020 Early March 2020 Mid-late March 2020 April 2020 ✓ Enhanced cleaning protocols ✓ March 17: Closed branch ✓ Rolled-out SBA Loan ✓ ✓ Activated Plan
Slide 22: Dispersion of Key Operating Functions
DISPERSION OF KEY OPERATING FUNCTIONS Safeguarding our operational resiliency scheduleA/B Implemented March 23 Alternating Escalated branch teams on-site 100% workforce of distributed distribution to all workforce team members 82% Team members plans working from 93% home* IT staff working >800 from
Slide 23: Helping Our Team Focus on What Matters Most
HELPING OUR TEAM FOCUS ON WHAT MATTERS MOST For our Team Members and their Families For our Team Members in their Workplaces • Providing Premium Pay for hourly team • Limited access to the interior of our members working on-site branches to minimize exposure of our customers and teammates • Establis
Slide 24: Helping Our Customers: Consumer Relief Programs
HELPING OUR CUSTOMERS FOCUS ON WHAT MATTERS MOST Relief programs for our consumer customers Loans Credit Cards • Payment deferments • Opportunity to skip payments with refunded or waived late fees • Unsecured installment loan with flexible income requirements and loan terms, first payment due • Perm
Slide 25: Helping Our Customers: Commercial Relief Programs
HELPING OUR CUSTOMERS FOCUS ON WHAT MATTERS MOST Relief programs for our commercial customers Loans Deposit Accounts Prepaid Cards • Payment deferments for • Requests can be made to • Implementation fees existing clients have overdraft fees waived for DirectCheck • refunded Card solution, an alterna
Slide 26: Providing Relief to Our Customers
PROVIDING RELIEF TO OUR CUSTOMERS Paycheck Protection Program (PPP) Began taking applications on April 3, 2020 $1.5B 4,529 ~375 80,000 $65K loans secured from the clients in nonprofit employees median Small Business Association our communities organizations (estimate) loan size Payment Relief Reques
Slide 27: What Our Customers Are Saying
WHAT OUR CUSTOMERS ARE SAYING “I wanted to let you know what a huge help your team has been this “Thank you for all your efforts to Branch week/weekend in helping us apply secure the SBA loan for us. It will Customer for paycheck relief. This would be a support jobs for over 200 Relationship HUGE de
Slide 28: Loan Portfolio: Limited Exposure to Pandemic-Sensitive Industries
LOAN PORTFOLIO: LIMITED EXPOSURE TO PANDEMIC-SENSITIVE INDUSTRIES While we expect nearly every industry to be impacted to some degree by Coronavirus-related disruptions, we have identified nine industries that will be most impacted. Loan Portfolio Highest Impacted $ in % of Loan Industries millions
Slide 29: Sound Capital and Liquidity Position
SOUND CAPITAL AND LIQUIDITY POSITION Total Risk-Based Capital Ratio1 Loan to Deposit Ratio Peer Median: 13.6% Large, stable deposit base and low OZK 15.6% CBSH 15.5% loan to deposit ratio UBSI 14.7% Core Deposits Average Loan to CFR 14.6% 73% Deposit Ratio3 FINN 14.3% Commerce BXS 14.2% $19.02 Avera
Slide 30: Strong Capital Position – Flexibility in Capital Planning
STRONG CAPITAL POSITION – FLEXIBILITY IN CAPITAL PLANNING 52 consecutive years of regular common cash dividend increases1 Capital Returned to Common Shareholders as a percentage of Net Income2 $300 Cash dividends paid on common stock (left) 200% $250 Common share repurchase (left) % Payout (right) 1
Slide 31: Strategic Position
“ STRATEGIC POSITION & Commerce Bancshares, Inc. 31
Slide 32: Strategic Posture: Maintaining the Balance
STRATEGIC POSTURE: MAINTAINING THE BALANCE STRONG PERFORMANCE with Disciplined focus on PRIORITY ongoing refinement of the BLUE CHIP investments “Core Bank” • Develop Claims Payment • Super-Community Bank platform • Commerce Bank Mortgage • Relationship-based banking • Accelerate Growth in Healthcar
Slide 33: Growth Mindset: Consumer Banking
GROWTH MINDSET: CONSUMER BANKING Enhancing the Customer Experience Engaging with customers through the channels they prefer. CommercePremier Branch Design Advanced ATMs • Technology investments • New engagement programs • Enhanced product offerings • Improved operating model Video Advisors Explorati
Slide 34: Growth Mindset: Internal Innovation at Commerce
GROWTH MINDSET: INTERNAL INNOVATION AT COMMERCE Internal software development Commerce’s commitment to As innovation and technology rapidly events to rapidly build, test, and promoting an innovative mindset, drive change, our customers’ needs TOOLS promote new products or services from everyday incr
Slide 35: Consumer Banking Snapshot
CONSUMER BANKING SNAPSHOT 164 $10.4 $4.2 1.1 Full-service BILLION BILLION MILLION branches Consumer Consumer Consumer 366 Deposits Loans* Households* ATMs Focus on Digital Commerce Digital HH Digital Loan Mobile Bank App Rating Penetration Sales (000s) Deposit Use 4.7 46% $42,755 13% 4.7 Period end
Slide 36: Commerce Trust Company wealth management
For high net worth individuals who are looking to simplify their complex financial life, Commerce Trust Company provides a full-service approach to wealth management. Key Growth Initiatives TH • Implement new Private 20Largest Among $57 $34 $539 Banking Lending Program Bank-Managed BILLION BILLION M
Slide 37: Commercial Banking
COMMERCIAL BANKING Revenue growth opportunities Financing solutions – options for all sizes and types of businesses • Equipment Financing • Working Capital Lines of Credit • Government Lending Programs • International Financing • Term Financing • Interest Rate Swaps • Employee Stock & Ownership Fina
Slide 38: Commercial Banking – Expansion Markets Offer Growth Opportunities
COMMERCIAL BANKING – EXPANSION MARKETS OFFER GROWTH OPPORTUNITIES Expansion Market Loan Growth Expansion Fee Income $ in millions Market Loan Team Overview for Growth $2,316 Growth Expansion Markets $2,200 # of team members per market 89% (includes open positions) $1,913 98% since 2015 since 201
Slide 39: Industry-Leading Commercial Payments Capabilities
INDUSTRY-LEADING COMMERCIAL PAYMENTS CAPABILITIES Innovative payments solutions to manage payables and receivables to streamline cash flow Key Verticals $177 Payments MILLION Revenue Tailored return on investment-based solutions Treasury enable healthcare providers to enhance the $47.7 Management pa
Slide 40: Card Products – A Leader Amongst Top U.S. Banks
CARD PRODUCTS – A LEADER AMONGST TOP 50 U.S. BANKS Consistently ranked among the top issuers in the Nilson Report Commercial Consumer Commercial#12 Purchasing#7 1 #12Bank Consumer#12 #19Debit #14Prepaid Card Issuer Card Issuer Acquirer Card Card Card A full suite of innovative card and payment produ
Slide 41: Capital for Business
CAPITAL FOR BUSINESS® A middle-market private equity firm focused on the success of industrial growth companies Quick Facts: Investment Criteria • • Manufacturing, distribution and certain service Small Business Investment Company companies (SBIC) founded in 1959 • Cash flow positive • Good manageme
Slide 42: Commerce Bank Maintains Solid Performance Over Time
COMMERCE BANK MAINTAINS SOLID PERFORMANCE OVER TIME Return on Average Assets 2.0% 1.5% ROAA 10-yr average 1.0% CBSH: 1.31% 0.5% Peers: .99% 0.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Commerce Peer Banks Large Banks Return on Average Common Equity 20.0% 15.0% ROACE 10-yr average 10.0% CBS
Slide 43: Long-Term View: Net Income and Earnings Per Share
LONG-TERM VIEW: NET INCOME AND EARNINGS PER SHARE $450 $4.00 400 Earnings Per Share Net Income 3.50 350 3.00 300 250 2.50 $ $ 000s 200 Net Income Net 2.00 150 1.50 100 Earnings per Share 50 1.00 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Dividends $0.58 $0.59 $0.62* $0.64 $0.67 $0.71 $0.74 $0
Slide 44: Steady Shareholder Returns
STEADY SHAREHOLDER RETURNS as of March 31, 2020 Annualized Comparison Total Shareholder Returns Total Shareholder Returns Indexed, 03/31/2005 = $100 Percent 350 20% CBSH NASDAQ Bank COMMERCE S&P 500 KBW Bank 300 NASDAQ 10% BANK 250 0% KBW BANK -10% 200 S&P 500 -20% 150 -30% 100 1 Year 3 Year 5 Year
Slide 45: Contact Information
Contact Information: Matthew Burkemper Senior Vice President, Commerce Bank Corporate Development and Investor Relations 314.746.7485 Matthew.Burkemper@commercebank.com Commerce Bancshares, Inc. Investor Relations website: http://investor.commercebank.com/
Slide 46: Embracing a Growth Mindset
8) Embracing a Growth Mindset » Commerce Bancshares, Inc.